- Net sales of Crisco shortening and cooking oil jumped nearly 23% in the second quarter, mostly driven by price increases that owner B&G Foods passed to cover “extreme” cost increases for ingredients like soybean and canola oils, the company said in its most recent earnings call.
- B&G President and CEO Casey Keller noted that price elasticity has increased since the last time B&G Foods raised Crisco prices in June, and that as future increases go into effect, “we do expect that some consumers may make the decision to trade down to private label, but we just haven’t seen it in large impact yet.”
- Manufacturers of products in commodity categories like shortenings and oils are grappling with covering increasing costs for ingredients while not pushing consumers toward private label offers.
After export bans and weather woes hampered supply and pushed prices for edible oils like soybean, palm and canola to all time highs earlier this year, manufacturers have had to scramble to find substitutions and cover their increased costs. The Consumer Price Index for fats and oils rose 20.8% on a 12-month basis in July, according to the U.S. Bureau of Labor Statistics’ latest data.
The run-up in edible oil prices is showing signs of easing. In July, the United Nations Food and Agriculture Organization’s global Vegetable Oil Price index fell 19.2% to reach a 10-month low. International quotes for rapeseed oil — known as canola in North America — fell with forecasts for a bumper crop, while soybean oil prices fell because of “protracted sluggish demand,” according to FAO.
While the downward trend in soybean and canola oil prices should eventually ease ingredient costs for manufacturers like B&G, for now, they must contend with the current environment.
Commodity categories like shortening are more vulnerable to consumers trading down to private label when prices increase. According to a recent IRI report on consumer behavior during inflation, shortening and oil ranked among the top food categories where private label grew its share, up 3 percentage points in the four weeks ending July 24. Keller said on the earnings call that Crisco had lost share to private label after its last round of price increases, but added that the company believes it can regain it.
Crisco has driven roughly 40% of B&G’s price increases, due to the volatility in oil costs. “Certainly for us, some of the real challenges that we saw in the quarter was just the disconnect or the rapid increase in the cost side from Crisco relative to when we were able to implement the price,” Keller said. However, B&G could revisit future price changes on Crisco if conditions improve.
”We will start to have the conversations about when we would possibly take Crisco prices down,” Keller said. “If commodity [costs] come down, we’re going to benefit probably in the first quarter of next year.”